ECB President Christine Lagarde said the central bank was creating a team of around 10 staff, reporting directly to her, to set the agenda on climate-related topics. “Climate change can create short-term volatility in output and inflation through extreme weather events, and if left unaddressed can have long-lasting effects on growth and inflation,” Lagarde noted.

Executive Board member Fabio Panetta also said, ECB has already taken steps on contributing to environmental policies in the implementation of monetary policy. For example, “sustainable finance instruments – the sustainability-linked bonds – among the collateral that can be used in refinancing operations” were included.

Additionally, “the ECB has to protect its balance sheet from the financial risks caused by climate change that are not correctly priced by the markets,” Panetta added. “By performing its own analysis of these risks on the basis of rigorous methodologies, the ECB can contribute to the accurate valuation of these climate-related risks and promote awareness among investors, thereby helping to combat climate change. These issues are currently being considered as part of our monetary policy strategy review.

Speaking at a conference in Aix-en-Provence, France, ECB Governing Council member Francois Villeroy de Galhau stated that Eurozone was nearing the “high point” of interest rates, a level expected to be sustained to allow full transmission of monetary policy effects.

Villeroy added, “But when I say high point this isn’t a peak, rather it will be a high plateau, on which we will have to remain for a sufficiently long time to fully transmit all the effects of monetary policy.”

Joining him on the panel was fellow Governing Council member Mario Centeno, who underlined ECB’s focus on headline inflation, noting its more rapid than anticipated decrease. However, he also highlighted the importance of core inflation, which he acknowledged was not dropping as swiftly.

Centeno stressed, “We target headline inflation, that’s very important. And headline inflation is coming down, actually it’s coming down faster than the way up.”

Centeno went on to add, “Core inflation stands out as a very important indicator. It’s not coming down as fast as headline inflation, but we also need to remember that in the way up it played exactly the same trajectory. So we need to remain confident too in the way we are fighting inflation.”

ECB Governing Council member Robert Holzmann told Swiss newspaper NZZ, “When it comes to the interest rate outlook, the ECB has always signalled that an interest rate hike should not take place until shortly after the bond purchases have ended.”

“But it would also be possible to take a first interest rate step in the summer before the end of the purchases and a second at the end of the year. I would favour that.”

Also, Holzmann said and exit from negative interest rate would be an “important signal” to the society and markets. He would likely to see two rate hikes by the end of this year or early 2023. But, “some of my colleagues would perhaps be even more progressive here, while others would be more cautious,” he added.

“I think that a key interest rate of very roughly 1.5% in 2024 could be realistic, although that may well shift forward or backward somewhat,” he said, adding that 1.5% would be a benchmark for neutral monetary policy.